RealNetworks Announces Second Quarter 2016 Results

FREE Breaking News Alerts from StreetInsider.com!

E-mail Address

StreetInsider.com Top Tickers, 8/18/2026

1. VNET
2. HD
3. DOO
4. ARGX
5. XP
6. AMLX
7. IMRFF
8. NVDA
9. SCTX
10. ENRD

- Revenue of $29.7 million as GAAP net loss and adjusted EBITDA improve by over 60%; - Stabilizing revenue, significantly reducing losses and making strides toward returning to revenue growth and profitability in 2016; - Expanding in Latin America with two new deals with Telefonica Vivo, Brazil's largest mobile carrier; - Launched two new first party titles in Games and both off to successful starts; - Rebranded Rhapsody as Napster in North America; and - Cash and short-term investments of $78.8 million

August 3, 2016 4:01 PM EDT

SEATTLE, Aug. 3, 2016 /PRNewswire/ -- RealNetworks, Inc. (Nasdaq: RNWK), a leader in personal digital entertainment, today announced results for the second quarter ended June 30, 2016.

For the second quarter of 2016, revenue was $29.7 million, compared to $28.2 million in the previous quarter and $31.8 million in the second quarter of 2015, excluding revenue from the Slingo and social casino games business, which was sold during the third quarter of 2015.

GAAP net loss for the second quarter of 2016 was $(8.3) million or $(0.23) per share, improved by 70% compared to $(27.8) million or $(0.77) per share in the second quarter of 2015.  Adjusted EBITDA for the second quarter of 2016 was a loss of $(4.8) million, which improved by 61% compared to $(12.5) million for the second quarter of 2015, excluding the results of the Slingo and social casino games business, which was sold in August 2015. A reconciliation of GAAP net income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

"In the second quarter of 2016, we continued to make progress in stabilizing revenue, reducing costs and positioning the company for growth and a return to profitability by the end of 2016," said Rob Glaser, Chairman and CEO of RealNetworks. "We are also excited that Telefonica Vivo, Brazil's largest carrier, has chosen to launch products based on both our Ringback Tone and RealTimes platforms. These two new design wins complement other recent progress we've made in our Mobile Services business with carriers such as Vodafone, KDDI, and Verizon."

The Company's GameHouse unit launched two new, first-party titles in the second quarter: Heart's Medicine - Time to Heal, and Fabulous - Angela's Fashion Fever. Both titles are off to strong starts, demonstrating that Real has been able to maintain high games quality while ramping up title production.

In addition to its progress with new product roll-outs, Real also made significant strides in lowering its operating costs.  The Company's operating expenses in the second quarter of 2016 were down 25% from the same period in 2015, excluding stock compensation, restructuring charges, and expenses from the Slingo and social casino games business.

As of June 30, 2016, the Company had $78.8 million in unrestricted cash, cash equivalents and short-term investments, compared to $86.8 million as of March 31, 2016.

Business Outlook

For the third quarter of 2016, RealNetworks expects total revenue in the range of $28 million to $30 million and an adjusted EBITDA loss for the third quarter in the range of $(5.0) million to $(7.0) million.

Webcast and Conference Call Information

The company will host a conference call today to review results and discuss the company's performance at 5 p.m. ET/2 p.m. PT. You may join the conference call by calling 888-790-3440 or +1-517-308-9350 (Passcode: Second Quarter Earnings). A live webcast of the call will be available at http://investor.realnetworks.com/ and an on-demand webcast will be available approximately one hour following the conclusion of the conference call. A telephonic replay will be available until 11:59 p.m. PT, August 24, 2016 by calling 866-441-1045 or +1-203-369-1053 (Passcode: 832016).

For More Information

Investor Relations for RealNetworks+1-206-729-3625[email protected]

RNWK-F

About RealNetworks

RealNetworks creates innovative applications and services that make it easy to connect with and enjoy digital media. RealNetworks invented the streaming media category in 1995 and continues to connect consumers with their digital media both directly and through partners, aiming to support every network, device, media type and social network. RealNetworks' corporate information is located at www.realnetworks.com/about-us.

RealNetworks and RealTimes are trademarks or registered trademarks of RealNetworks, Inc. or its subsidiaries. All other companies or products listed herein are trademarks or registered trademarks of their respective owners.

About Non-GAAP Financial Measures

To supplement RealNetworks' consolidated financial information presented in accordance with GAAP in this press release, the company also discloses certain non-GAAP financial measures, including adjusted EBITDA and contribution margin by reportable segment, which management believes provide investors with useful information.

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income (loss) to adjusted EBITDA and operating income (loss) by reportable segment to contribution margin by reportable segment.

The rationale for management's use of non-GAAP measures is included in the supplementary materials presented with the quarterly earnings materials.  Please refer to Exhibit 99.2 ("Information Regarding Non-GAAP Financial Measures") to the company's report on Form 8-K, which is being submitted today to the SEC.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to RealNetworks' current expectations regarding future revenue and adjusted EBITDA, our future growth, profitability, and market position, our strategic focus and initiatives, agreements with partners, and the growth and future prospects relating to our Rhapsody affiliate. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements.  These statements reflect RealNetworks' expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: RealNetworks' ability to realize operating efficiencies, growth and other benefits from the implementation of its growth plan, strategic initiatives, and restructuring efforts; the emergence of new entrants and competition in the market for digital media products and services; other competitive risks, including the growth of competing technologies, products and services; the potential outcomes and effects of claims and legal proceedings on RealNetworks' business, prospects, financial condition or results of operations; risks associated with key customer or strategic relationships, business acquisitions and the introduction of new products and services; changes in consumer and advertising spending in response to disruptions in the global financial markets; fluctuations in foreign currencies; and changes in RealNetworks' effective tax rate. More information about potential risk factors that could affect RealNetworks' business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, its quarterly reports on Form 10-Q and in other reports and documents filed by RealNetworks from time to time with the Securities and Exchange Commission. The preparation of RealNetworks' financial statements and forward-looking financial guidance requires the company to make estimates and assumptions that affect the reported amount of assets and liabilities, and revenues and expenses during the reported period.  Actual results may differ materially from these estimates under different assumptions or conditions. The company assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

Quarters Ended

June 30,

Six Months Ended

June 30,

2016

2015

2016

2015

 (in thousands, except per share data)

 Net revenue

$

29,734

$

33,954

$

57,964

$

64,551

 Cost of revenue

15,698

19,832

30,870

36,379

           Gross profit

14,036

14,122

27,094

28,172

 Operating expenses:

       Research and development

7,167

11,801

16,486

24,180

       Sales and marketing

7,749

14,047

16,974

26,884

       General and administrative

6,217

7,008

14,294

14,291

       Restructuring and other charges

413

1,964

798

2,449

       Lease exit and related charges

127

9

958

87

           Total operating expenses

21,673

34,829

49,510

67,891

 Operating income (loss)

(7,637)

(20,707)

(22,416)

(39,719)

 Other income (expenses):

       Interest income, net

80

250

197

450

       Gain (loss) on investments, net

(46)

94

(43)

393

       Equity in net loss of Rhapsody

(396)

(6,916)

(396)

(13,096)

       Other income (expense), net

15

(112)

(272)

331

           Total other income (expense), net

(347)

(6,684)

(514)

(11,922)

 Income (loss) before income taxes

(7,984)

(27,391)

(22,930)

(51,641)

 Income tax expense (benefit)

363

390

588

609

 Net income (loss)

$

(8,347)

$

(27,781)

$

(23,518)

$

(52,250)

 Basic net income (loss) per share

$

(0.23)

$

(0.77)

$

(0.64)

$

(1.45)

 Diluted net income (loss) per share

$

(0.23)

$

(0.77)

$

(0.64)

$

(1.45)

 Shares used to compute basic net income (loss) per share

36,755

36,106

36,637

36,105

 Shares used to compute diluted net income (loss) per share

36,755

36,106

36,637

36,105

 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

June 30,

 2016

December 31,

 2015

 (in thousands)

ASSETS

 Current assets:

 Cash and cash equivalents

$

36,133

$

47,315

 Short-term investments

42,656

51,814

 Trade accounts receivable, net

24,617

22,511

 Deferred costs, current portion

889

460

 Prepaid expenses and other current assets

4,716

7,140

   Total current assets

109,011

129,240

 Equipment and software

60,383

66,702

 Leasehold improvements

3,607

3,122

   Total equipment, software, and leasehold improvements

63,990

69,824

 Less accumulated depreciation and amortization

56,887

61,024

   Net equipment, software, and leasehold improvements

7,103

8,800

 Restricted cash equivalents and investments

3,000

2,890

 Available for sale securities

1,920

1,721

 Other assets

2,243

2,307

 Deferred costs, non-current portion

1,136

212

 Deferred tax assets, net

1,006

957

 Other intangible assets, net

1,545

2,136

 Goodwill

12,973

13,080

   Total assets

$

139,937

$

161,343

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Current liabilities:

 Accounts payable

$

17,442

$

17,050

 Accrued and other current liabilities

15,566

17,320

 Deferred revenue, current portion

3,278

3,497

   Total current liabilities

36,286

37,867

 Deferred revenue, non-current portion

466

105

 Deferred rent

665

620

 Deferred tax liabilities, net

89

88

 Other long-term liabilities

1,511

1,980

   Total liabilities

39,017

40,660

 Shareholders' equity

100,920

120,683

 Total liabilities and shareholders' equity

$

139,937

$

161,343

 

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended

June 30,

2016

2015

 (in thousands)

 Cash flows from operating activities:

 Net income (loss)

$

(23,518)

$

(52,250)

 Adjustments to reconcile net income (loss) to net cash used in operating activities:

   Depreciation and amortization

4,224

4,894

   Stock-based compensation

3,779

2,583

   Equity in net loss of Rhapsody

396

13,096

   Deferred income taxes, net

(148)

(23)

   Loss (gain) on investments, net

43

(393)

   Fair value of warrants granted in 2015, net of subsequent mark to market adjustments in 2016 and 2015

82

(1,128)

   Interest receivable on advance to Rhapsody

—

(121)

   Net change in certain operating assets and liabilities

(3,209)

(10,230)

      Net cash provided by (used in) operating activities

(18,351)

(43,572)

 Cash flows from investing activities:

 Purchases of equipment, software, and leasehold improvements

(1,512)

(859)

 Proceeds from sale of available for sale securities

—

459

 Purchases of short-term investments

(33,359)

(8,514)

 Proceeds from sales and maturities of short-term investments

42,517

48,630

 Decrease (increase) in restricted cash equivalents and investments, net

(110)

—

 Acquisitions

(150)

(161)

 Advance to Rhapsody

—

(5,000)

   Net cash provided by (used in) investing activities

7,386

34,555

 Cash flows from financing activities:

 Proceeds from issuance of common stock (stock options and stock purchase plan)

166

276

 Tax payments from shares withheld upon vesting of restricted stock

(808)

(10)

     Net cash provided by (used in) financing activities

(642)

266

 Effect of exchange rate changes on cash and cash equivalents

425

(1,839)

     Net increase (decrease) in cash and cash equivalents

(11,182)

(10,590)

 Cash and cash equivalents, beginning of period

47,315

103,253

 Cash and cash equivalents, end of period

$

36,133

$

92,663

 

RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)

2016

2015

 Q2

Q1

 Q4

 Q3

 Q2

 Q1

 (in thousands)

Net Revenue by Line of Business

Consumer Media (A)

$

6,400

$

5,726

$

6,848

$

6,495

$

7,281

$

7,989

Mobile Services (B)

17,297

16,465

16,369

16,484

18,578

14,504

Games (C)

6,037

6,039

6,705

7,844

8,095

8,104

     Total net revenue

$

29,734

$

28,230

$

29,922

$

30,823

$

33,954

$

30,597

Net Revenue by Product

Consumer Media

- License (D)

$

3,914

$

3,104

$

3,967

$

3,628

$

4,208

$

4,672

-Subscriptions (E)

1,871

1,975

2,054

2,147

2,372

2,384

- Media Properties (F)

615

647

827

720

701

933

Mobile Services

- SaaS (G)

17,208

16,220

16,157

16,217

18,218

13,322

- Technology License & Other (H)

89

245

212

267

360

1,182

Games

- License (I)

2,793

2,761

3,268

4,128

3,943

3,835

- Subscriptions (J)

3,024

3,029

3,126

3,231

3,373

3,570

- Media Properties (K)

220

249

311

485

779

699

     Total net revenue

$

29,734

$

28,230

$

29,922

$

30,823

$

33,954

$

30,597

Net Revenue by Geography

United States

$

10,355

$

10,383

$

10,781

$

11,460

$

12,303

$

12,349

Rest of world

19,379

17,847

19,141

19,363

21,651

18,248

     Total net revenue

$

29,734

$

28,230

$

29,922

$

30,823

$

33,954

$

30,597

Net Revenue by Line of Business

(A)

 The Consumer Media division primarily includes revenue from RealPlayer and related products, such as the distribution of third-party software products, advertising on RealPlayer websites, sales of RealPlayer Plus software licenses to consumers, sales of intellectual property licenses, and consumer subscriptions such as RealPlayer Plus and SuperPass.

(B)

The Mobile Services division primarily includes revenue from SaaS services and sales of professional services provided to mobile carriers.

(C)

 The Games division primarily includes revenue from sales of games licenses, online games subscription services, advertising on games sites and social network sites, microtransactions from online and social games, and sales of mobile games.

Net Revenue by Product

(D)

Licensing revenue within Consumer Media includes sales of intellectual property licenses and RealPlayer Plus software licenses to consumers.

(E)

Subscriptions revenue within Consumer Media includes revenue from subscriptions such as our RealPlayer Plus and SuperPass offerings.

(F)

Media Properties revenue within Consumer Media includes distribution of third-party software products and advertising on RealPlayer websites.

(G)

SaaS revenue within Mobile Services includes revenue from music on demand, ringback tones, intercarrier messaging services, and RealTimes.

(H)

Technology licensing and other revenue within Mobile Services includes revenue from professional services provided to mobile carriers.

(I)

Licensing revenue within Games includes retail games-related revenue and sales of mobile games.

(J)

Subscriptions revenue within Games includes revenue from online games subscriptions as well as microtransactions from mobile and social games.

(K)

Media Properties revenue within Games includes advertising on games sites and social network sites.

 

RealNetworks, Inc. and Subsidiaries

Segment Results of Operations and Reconciliation to non-GAAP Contribution Margin

(Unaudited)

2016

2015

2016

2015

Q2

Q1

Q2

YTD

YTD

 (in thousands)

Consumer Media

Net revenue

$

6,400

$

5,726

$

7,281

$

12,126

$

15,270

Cost of revenue

1,561

2,417

3,567

3,978

7,031

   Gross profit

4,839

3,309

3,714

8,148

8,239

   Gross margin

76

%

58

%

51

%

67

%

54

%

Operating expenses

4,293

5,376

6,867

9,669

13,461

Operating income (loss), a GAAP measure

$

546

$

(2,067)

$

(3,153)

$

(1,521)

$

(5,222)

Depreciation and amortization

375

1,303

478

1,678

989

  Contribution margin, a non-GAAP measure

$

921

$

(764)

$

(2,675)

$

157

$

(4,233)

Mobile Services

Net revenue

$

17,297

$

16,465

$

18,578

$

33,762

$

33,082

Cost of revenue

12,404

10,917

13,982

23,321

24,290

   Gross profit

4,893

5,548

4,596

10,441

8,792

   Gross margin

28

%

34

%

25

%

31

%

27

%

Operating expenses

8,784

9,794

12,099

18,578

24,060

Operating income (loss), a GAAP measure

$

(3,891)

$

(4,246)

$

(7,503)

$

(8,137)

$

(15,268)

Acquisitions related intangible asset amortization

209

308

384

517

776

Depreciation and amortization

608

422

579

1,030

1,159

Contribution margin, a non-GAAP measure

$

(3,074)

$

(3,516)

$

(6,540)

$

(6,590)

$

(13,333)

Games

Net revenue

$

6,037

$

6,039

$

8,095

$

12,076

$

16,199

Cost of revenue

1,817

1,845

2,286

3,662

5,080

   Gross profit

4,220

4,194

5,809

8,414

11,119

   Gross margin

70

%

69

%

72

%

70

%

69

%

Operating expenses

4,725

5,295

8,719

10,020

17,402

Operating income (loss), a GAAP measure

$

(505)

$

(1,101)

$

(2,910)

$

(1,606)

$

(6,283)

Acquisitions related intangible asset amortization

34

25

312

59

605

Depreciation and amortization

154

179

244

333

541

   Contribution margin, a non-GAAP measure

$

(317)

$

(897)

$

(2,354)

$

(1,214)

$

(5,137)

Corporate

Cost of revenue

$

(84)

$

(7)

$

(3)

$

(91)

$

(22)

   Gross profit

84

7

3

91

22

   Gross margin

N/A

N/A

N/A

N/A

N/A

Operating expenses

3,871

7,372

7,144

11,243

12,968

Operating income (loss), a GAAP measure

$

(3,787)

$

(7,365)

$

(7,141)

$

(11,152)

$

(12,946)

Other income (expense), net

15

(287)

(112)

(272)

331

Depreciation and amortization

246

361

394

607

824

Restructuring and other charges

413

385

1,964

798

2,449

Stock-based compensation

608

3,171

1,254

3,779

2,583

Lease exit and related charges

127

831

9

958

87

   Contribution margin, a non-GAAP measure

$

(2,378)

$

(2,904)

$

(3,632)

$

(5,282)

$

(6,672)

 

RealNetworks, Inc. and Subsidiaries

Reconciliation of Net income (loss) to adjusted EBITDA, a non-GAAP measure

(Unaudited)

2016

2015

2016

2015

 Q2

 Q1

 Q2

 YTD

 YTD

 (in thousands)

Net income (loss)

$

(8,347)

$

(15,171)

$

(27,781)

$

(23,518)

$

(52,250)

Income tax expense (benefit)

363

225

390

588

609

Interest income, net 

(80)

(117)

(250)

(197)

(450)

Gain (loss) on investments, net

46

(3)

(94)

43

(393)

Equity in net loss of Rhapsody

396

—

6,916

396

13,096

Acquisitions related intangible asset amortization

243

333

696

576

1,381

Depreciation and amortization

1,383

2,265

1,695

3,648

3,513

Restructuring and other charges

413

385

1,964

798

2,449

Stock-based compensation

608

3,171

1,254

3,779

2,583

Lease exit and related charges

127

831

9

958

87

   Adjusted EBITDA, a non-GAAP measure

$

(4,848)

$

(8,081)

$

(15,201)

$

(12,929)

$

(29,375)

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/realnetworks-announces-second-quarter-2016-results-300308717.html

SOURCE RealNetworks, Inc.


Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Press Releases

Related Entities

Earnings